Tuesday, November 25, 2008

Corporate Culture: the enabler for innovation

If you've followed the innovation market for any period of time, you'll know that most innovators and innovation consultants will tell you that innovation can happen anywhere once or twice, but can be difficult to sustain. The difficulty in sustaining innovation over time in any firm relates to inertia, fear of change, avoidance of risk and the difficulty of constantly creating something new. In other words, the barriers are not necessarily about generating ideas or understanding trends in the marketplace, or the ability to convert good ideas into new products and services. No, we've maintained for years now that the biggest barrier to consistent, sustainable innovation in any firm is corporate culture. And, thanks to some new research from several noted professors, it appears that our contention has been proven correct.

Tellis, Prabhu and Chandy, writing for an upcoming Journal of Marketing edition, have published their research and findings into the critical drivers for innovation success. Their hypothesis is that other factors have been identified as the key drivers for innovation, rather than corporate culture. Those factors could include geography, national culture, government involvement and many others. However, after conducting surveys across over 700 firms and 17 countries, their finding bear out what many of us have always maintained. No matter where you are located, no matter what product or service you provide, innovation is first and foremost a factor of corporate culture.

At OVO, we've always believed that there are three important enablers to innovation within any organization: corporate culture, compensation and communication. By culture we mean the factors that enable innovators to work. The ability to take risks and fail without punishment. The ability to cannabalize or stretch the business outside of its expected scope. Whether or not the firm welcomes new ideas or has a "not invented here" mentality. Two other factors are equally important - compensation and culture. From a compensation standpoint, do we reinforce in the evaluations and paypackets what we say is important? Do individuals and teams have the appropriate resources to innovate? Are they rewarded and evaluated on their innovation efforts? Often, firms will tell their employees to innovate but will not change their evaluation schemes or compensation or reward structures, so people quickly revert to doing what they are evaluated on and paid to do. Finally, we believe communication is very important for innovation. What does innovation mean to the business? Does the senior leadership constantly reinforce the need and focus on innovation? How are these focus areas communicated and how frequently?

From a company culture point of view, the study looked at six variables or concepts to measure innovation:

  1. willingness to cannabalize existing products or services
  2. future market orientation
  3. Risk tolerance
  4. Product champions
  5. Incentives
  6. internal markets

These serve as good proxies for the willingness of the corporate culture to innovate. Their findings suggest that of these, risk tolerance, future market orientation and willingness to cannabalize were evidenced in innovative firms, as well as placing an emphasis on incentives (which we read as compensation).

OK, so if this study is at least one confirmation of the importance of a culture that encourages and embraces innovation, what can your firm do? First, use these factors as a gauge. Does your firm encourage risk taking and does it have a future market orientation? If not, can these factors be changed or influenced? Changing a corporate culture does not happen overnight, but it can happen through concentrated focus by the management team and rewarding/recognizing the behaviors that are sought.

There's really no excuse for failing to innovate. We understand the need to bring more new ideas to the market faster, and now we've got at least one clear data point that identifies the biggest barrier to something we all recognize we need to do. If your firm is already innovative, keep up the focus on the culture that supports that. If not, take the steps necessary to adjust the culture to meet your needs.
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posted by Jeffrey Phillips at 5:37 AM 12 comments

Monday, November 17, 2008

The iPod of Potato Chips (or Razors or shoes)

I was reviewing a webpage recently when an ad caught my eye. That's fairly difficult given the number of ads on most webpages. What stuck with me was the brand statement - the ad said that the razor in question was the "iPod of Razors". I am now waiting for the deluge of "iPod" products in every category. The iPod of ice cream, toilet paper and dish washing detergent. It's only a matter of time.

This is silly comparison on a number of levels, and perhaps the advertisers are making this comparison in a tongue in cheek way. The iPod is successful for many reasons - it has a cool design, it had a fan base (Mac users) waiting for options different from Microsoft and Sony based MP3 players, it is from Apple so it had some style points, and the designers of the iPod took the time to understand the customer experience. After all, the iPod is just a music player - if the music isn't easily (and legally) available, what's the point?

If a new product or service wants to claim to be the "iPod" of its market, then it needs more than good design. Most of the products that win design awards are quickly relegated to the back shelf, design alone doesn't win the customer. Cost, availability, style, integration with other existing standards and a host of other items determine what wins and loses in the market. To be the "iPod" in a market is to think carefully about all aspects of the purchase, consumption and use of the product or service, and to have a great answer to all of those attributes. For many consumer products and services, defining and controling the environment in which the product is used, and the secondary and tertiary actors in the market is difficult if not impossible. While Apple could eventually round up the licensing for the song downloads, can we control the environment and peripheral actors in other consumer markets?

When you claim to be the "iPod" of your market you are claiming to manage variability and risk in the "whole product" experience of the customer. Can your firm do that effectively?
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posted by Jeffrey Phillips at 12:12 PM 1 comments

Thursday, November 13, 2008

Working with an innovation consultant part 2

After working with a number of companies on innovation initiatives and projects, I've learned a lot about the needs for innovation and how to structure an innovation program or project. If your firm is contemplating a new innovation effort, consider these concepts and how they might shape your initiatives and goals.

  • The need for big, quick results versus the existing procedures and machinery. It's rare that we hear a firm say "We need a big new idea and we're willing to develop it and nurture it over a reasonable period of time". No, usually what most firms demand is a really big idea they can implement quickly - as if the "low hanging" fruit hasn't already been picked. The fallacy of this argument is two fold: unless the firm is in truly dire circumstances, any big idea will present risks to some part of the business and will face opposition, so it won't move quickly. And, even if the idea didn't face opposition, the number of "game changing" ideas is limited and may take some time to identify. You want quick ideas? No problem. You want big ideas? Ok, but it may take a little while. You want big ideas that can be implemented quickly? Much more difficult.
  • Innovation can't change your product development lifecycle unless you focus on that first. Let's assume we were lucky and created a big new idea that will have a lot of impact on the market. The idea has been evaluated and approved. We've only cleared the first hurdle. In most firms the product development lifecycle is just beginning, and can take anywhere from several months to several years. Unless you've streamlined your product development timeframe or can develop the idea outside your traditional product development process, there's still a "long pole" in the tent.
  • People have to actively participate. Ideas don't generate themselves, and they certainly can't evaluate or test themselves. When we reach the stage where computers can generate and evaluate the ideas for us, and then prototype them and test them as well, then we can all get back to doing our "real jobs". Until those dreams are realized, people need to be actively engaged in all facets of the innovation process. Currently, the expectation seems to be that we'll identify a few people to participate in a part-time effort for a month or two, unless something more important or pressing shows up. How can innovation ever be more pressing than an immediate customer requirement or sales issue? We've already demonstrated that ideas take time to nurture and grow, so very few ideas will have immediate impact. Innovation is always important but rarely urgent, so the staffing of an innovation effort always suffers.
  • Think like a farmer, act like a hunter. Farmers place the seeds in the ground and groom the soil, patiently waiting for the crop to bear fruit. They understand the cycles and the seasons. They realize a corn crop will take six months to grow, and in the off season they till the soil to prepare the next crop. Hunters are opportunists. They spot the game and shot what's in front of them, when it's available. Innovators need to groom their cultures and grow their ideas like farmers and implement those ideas when the opportunities are right like hunters. Without the farming, there's no ready stock of ideas in the pipeline. Without the hunter, there's no recognition of the opportunity.
When you embark on an innovation effort, consider these concepts when you are working with an innovation consultant. Set your expectations effectively and ensure that your management team understands the timeframes and commitments necessary to make innovation successful.
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posted by Jeffrey Phillips at 5:13 AM 1 comments

Thursday, November 06, 2008

Inside Project Red Stripe book review

I received a copy of the book Inside Project Red Stripe recently and I've really struggled with it, for a couple of reasons. First, it's a book about an innovation project, so of course that attracted my attention. Second, the innovation project was run by individuals within The Economist, my favorite magazine (or newspaper as they like to say). So, when someone writes a book about one of your favorite subjects (innovation) that's based on a real world example of innovation in one of your favorite news sources, that's compelling stuff.

What made this even more interesting/frustrating was the approach the author took to documenting the project. Right from the start you need to know that Inside Project Red Stripe is less a book than a blog, and certainly not a how to book but more a philosophical dissection of the innovation team, their plans and their efforts. The author is as interested in the coming together and falling apart of the team, and the definition of the expectations of the team, and the methods under which they work, as he is actual innovation.

The team is asked to create a big new innovation for The Economist, and throughout the book you can identify "Things they did well" and "Things they didn't do so well". Ultimately the team fell into a trap that meant their work was not strategically aligned to the mission and goals of The Economist. Toward the end of the book two of the team members are seen asking the steering team what they must present so the ideas they have aren't killed by the steering team. At that point, asking that question is simply a signal that you know you've failed.

The book can be confusing because the author chose to write about topics and people rather than functions and process, so the book does not necessarily progress chronologically, and the author makes a number of interesting but arcane references to authors and writings on a plethora of topics, some well known, some that probably require a PhD to understand. This book is also fascinating because it is written almost in real time in a Rashomon style - seeing the project unfold from five or six different perspectives all at the same time.

I think you'll benefit from reading this book, but in a contemplative, meditative fashion. Each chapter is really a meditation on a specific need or requirement for team building, creativity, innovation, communication and a host of other topics, as well as a dissection of what the team was thinking at the time. Probably some of the best insights come from what appear to be direct quotes from the team. Since the author was a live participant, he was also somewhat of a cultural anthropologist as well.

The Project Red Stripe team missed a couple of key factors for success. They did not have a clear brief and ended up with solution not aligned to The Economist core mission. They had internally conflicting goals - each person saw a very different outcome for the project and for themselves personally. They were all committed to the success of the project and of The Economist, but had very different perspectives about what that meant. Also, they were too focused on what the author calls "the whale" - the one big idea, and probably missed or ignored a lot of ideas that could have been valuable.

I'd highly recommend this book to any team embarking on an innovation initiative, but with a few clear caveats. To its credit, this book is not presented or written like the other "how to" books on innovation, nor is it one of those books that looks back at a successful project and champions a specific person or approach. Rather, it examines a lot of the issues and challenges of building an innovation team and doing the somewhat difficult, messy work of innovation and the day to day challenges that the team faces.
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posted by Jeffrey Phillips at 4:53 AM 3 comments

Tuesday, November 04, 2008

Working with an innovation consultant part 1

I completed an initial sales call today with a prospective client. The client has some interesting challenges and opportunities and seems like they want to work with us. However, I've found myself reliving - almost like Groundhog Day - the same discussions and issues in this sales call that I find myself discussing in most innovation business development efforts. So, in the interest of saving us all time and money, here's a recommended approach to working with an innovation consultant. I've decided to break this into two parts - the "sales" process and the actual working relationship.

First, let's talk about sales.

Almost every firm I speak with will admit "we're not good at innovation" and will provide several reasons that they aren't innovative. The culture doesn't support innovation, there's not enough time and resources, there's no team associated with innovation, there's too much risk associated with innovation, the firm is doing too well to consider innovation, the firm is doing too poorly to consider innovation, etc. In the next breath they'll tell me that it is important that they demonstrate innovation within the next three or four months, generally because the CEO has decided that their business needs some of that innovation magic.

So, we will often start with the basics. What's your strategy and goal for the business over a 3 to five year period? How do you want to be positioned in the marketplace? What strategies, tactics, products and services can we improve or enable through innovation? I'm constantly surprised by the fact that most people consider innovation a strategy, rather than an enabler to the strategies and goals of the business. Usually it can take several weeks for folks to agree on what they want to "innovate" around. Then, they want to jump quickly to the "low hanging"fruit to show "quick wins". If there is "low hanging" fruit available in most organizations, it has either been 1) picked or 2) proven to be undigestible. Additionally, nothing will deflate your team more than to have other say that nothing the team did was "new" or difficult.

Another thing that constantly astonishes me is how little insight firms have about their customers. Innovation should be about creating products, services and business models that satisfy unmet, undermet or undiscovered needs. How can you innovate if you don't understand the trends in your industry and the met and unmet needs in your customer base? Go, do some research. Talk to your customers. Understand the trends that are occurring in your market. Since this is election day 2008, I have a brief note for those of you in heavily regulated industries. The Democrats are winning the house, senate and White House. What plans and initiatives have you put in place to act proactively to that and the implications that win has for your industry - for example, in the healthcare industry, which the Democrats have promised to change dramatically? Or perhaps you'd like to be in coal industry right now?

Understanding your strategy and how you can leverage innovation as an enabler to satisfy new customer needs or uncover new markets will go a long way to helping you work successfully with an innovation partner or consultant, or just on your own. Setting reasonable timeframes and not jumping to the "quick wins" will help you build a longer, sustainable innovation program. After all, you didn't get in the situation you are in overnight, and it will take at least as long to fix.

Once you have a reasonable understanding of your strategy and how innovation can be applied, have set reasonable expectations regarding timeframes and investments and have a good understanding of your markets, trends and customers, you are ready to work on innovation.
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posted by Jeffrey Phillips at 11:32 AM 2 comments